Chinese Tech Stocks Surge as PBOC Slashes Lending Rates

TLDR

Table of Contents

The People’s Bank of China cut benchmark lending rates by 10 basis points for the first time this year
One-year loan prime rate reduced to 3% and five-year rate to 3.5%
Chinese e-commerce stocks rose following the announcement, with Alibaba up 1.1% and JD.com gaining 1.2%
Alibaba has jumped 45% and PDD Holdings has added 22% in 2025
The Shanghai Composite rose 0.4% and the Shenzhen Component gained 0.8% on Tuesday after the rate cuts

China’s central bank has cut key lending rates for the first time in seven months, boosting Chinese tech stocks and market indices. The move aims to revive faltering demand in the world’s second-largest economy.

The People’s Bank of China (PBOC) announced on Tuesday that it would lower the one-year loan prime rate to 3% and the five-year rate to 3.5%. This marks a reduction of 10 basis points for both rates and represents the first such cut this year.

China banks lowered their benchmark lending rates for the first time in seven months following the guidance of the PBOC with the 1-yr and 5-yr prime rates (LPRs) dropping 10bps to 3 & 3.5% respectively.
The LPRs were last lowered by 25 basis points in October following broad… https://t.co/egOGrElLRl pic.twitter.com/1rVn2Wh9SI
— Neil Sethi (@neilksethi) May 20, 2025

The central bank cited the result of biddings by China’s major banks as the reason for the adjustment. Reports also indicate that major Chinese state banks have cut deposit rates to support the economy amid ongoing monetary easing efforts.

Chinese e-commerce stocks responded positively to the news. Alibaba Group’s American depositary receipts climbed 1.1% ahead of the U.S. opening bell on Tuesday. ADRs for rival JD.com gained 1.2%, while those for Temu parent PDD Holdings ticked up 0.2%.

These stocks have performed well throughout 2025. Alibaba has jumped 45% this year, while PDD Holdings has added 22%. The strong performance has been driven by expectations that Beijing would turn to fiscal and monetary policy stimulus.

Market Response

The broader Chinese market also reacted favorably to the rate cuts. The Shanghai Composite rose 0.4% to close at 3,380 on Tuesday. At the same time, the Shenzhen Component gained 0.8% to reach 10,249.

Market sentiment improved following the PBOC’s announcement. This positive mood was further enhanced by the successful Hong Kong debut of Contemporary Amperex Technology, the world’s largest battery manufacturer.

The listing of Contemporary Amperex Technology marks the largest global listing of 2025. Shares surged on their first day of trading, adding to the overall optimistic market sentiment.

Several other stocks posted gains on Tuesday. China Merchants Bank rose by 0.8%, while BYD Company jumped 3.1%. Cambricon Technologies increased by 1.4%, and Inner Mongolia BaoTou Steel climbed 2.2%.

Economic Context

The rate cuts come as China faces economic challenges. The country has been dealing with disinflation and flagging domestic demand, prompting the government to explore various policy options.

The PBOC’s decision to cut lending rates aims to stimulate borrowing and investment. Lower interest rates typically make loans more affordable for businesses and consumers, potentially boosting economic activity.

This move represents part of a broader strategy by Chinese authorities to support economic growth. The central bank’s action suggests that officials are concerned about the current pace of expansion.

While U.S. futures tracking the S&P 500 were down 0.4% on the same day, Chinese markets showed resilience. The contrast highlights the divergent economic conditions and policy approaches between the two largest economies in the world.

The PBOC’s rate cut is the first in seven months, indicating a shift in monetary policy. How this will affect China’s economic trajectory in the coming months remains to be seen.

The central bank’s decision to lower key lending rates aims to reverse disinflation and prop up flagging domestic demand in the Chinese economy.

Stay Ahead of the Market with Benzinga Pro!

Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders: